Relief for Facebook as users up after falling for first time

Facebook heaved a sigh of relief as the number of users increased after falling for the first time since the social networking site was founded.

The number of daily active Facebook users rose to 1.96 billion in the first three months of the year, coming as a huge boost to the social network which reported in February that its users had dropped for the first time in its 18 years of existence. The fall led to losses worth billions in the firm’s market value.  

Facebook’s share price has declined by almost a half since the drop in the number of users.  The shares, however, went up by 19per cent last Wednesday.

Meta boss Mark Zuckerberg, who set up Facebook in 2004, strikes an optimistic note saying the firm continues to be a critical tool for the service of humanity.

“More people use our services today than ever before, and I’m proud of how our products are serving people around the world,” noted Zuckerberg.

Despite the rise in user numbers, Meta – which also owns Instagram and WhatsApp – booked the slowest revenue growth in a decade. Income in the first three months of the year increased by 7 percent compared to 2021, hitting $27.9 billion.

BBC reported analysts stating that businesses are pulling back on advertising as they “grapple with rising costs and economic uncertainty, stemming in part from the war in Ukraine”.

Facebook is facing increasing competition from new platforms such as TikTok.

Even Google is not spared the heat from rivals. Its parent company Alphabet has said ads earnings in the first three months of the year rose 22 per cent, more slowly than analysts had projected.  

Mr Zuckerberg noted that his firm is working on strategies to ensure Facebook remains competitive in attracting ads and face off with competitors. He noted that the company is investing in its video “Reels” which it says will favourably compete with TikTok.

Facebook is also betting big on artificial intelligence and virtual reality – the two key building blocks for the Metaverse – for its next phase of growth. However, the firm has cited prohibitive costs as the biggest impediment to implementing its new plans.

“Meta’s ad business continues to face some very real challenges,” said Jasmine Enberg, principal analyst at Insider Intelligence.

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